Question

Trading in the futures market

a.

occurs for all contracts during the normal trading hours of 9:30am to 4:00pm.

b.

is totally automated using the electronic system supplied by the CBT.

c.

includes calls but no puts on futures contracts.

d.

is done under a system where demand and supply set the contract price.

If, as an individual investor, you want to buy a futures contract, you can do so by

a.

going through a local brokerage office, just as you would for a stock purchase.

b.

attending one of the open outcry auctions.

c.

putting a bid in with the Federal Reserve Bank.

d.

directly calling the Chicago Board of Trade (CBT) or one of the other organized commodities exchanges.

Which one of the following statements concerning interest rates is correct?

a.

Economic expansions will cause interest rates to decline.

b.

Rising interest rates in foreign countries will cause U.S. interest rates to decline.

c.

A decrease in the money supply will cause interest rates to decline.

d.

A federal budget surplus will cause interest rates to decline.

Answer 1

A) Trading in the Futures market - "occurs for all contracts during the normal trading hours of 9:30am to 4:00pm"

Explanation - Trading in these contracts occur like the normal trading hours i.e. 9.30 am to 4 pm.

Rest other options are not true for this. Call and Put options are other derivatives which are traded and are different from future contracts. The price of the contract is not set by the demand and the supply, there're various other factors that decides this.

B)If, as an individual investor, you want to buy a futures contract, you can do so by - going through a local brokerage office, just as you would for a stock purchase.

Explanation - Trading in these contracts are done similar to what we do with stocks. Now, we can't approach the Federal bank or even the exchanges for this. Brokerage offices/ houses facilitates the buying and selling of these contracts.

C)Which one of the following statements concerning interest rates is correct?

Answer - D Surplus of budget would not make them borrow funds or you can say there isn't any shortage of funds. Funds are available easily and hence interest rates tend to decline in such cases.

Explanation - Economic expansion causes interest rate to rise as people have more spending capacity and as expansion happens inflation increases. Smaller money supply will cause the interest rate to increase as there would be shortage of funds making it difficult to get the funds easily and thus increasing the interest rates.